Oil report

Finland to introduce law next year phasing out coal

* Other energy sources needed to replace coal

* Finland to vote on carbon tax increase in 2018

* Two new nuclear reactors due online by 2024

HELSINKI, Aug 31 (Reuters) - Finland will introduce legislation next year to phase out coal and increase carbon taxes, a top government official told Reuters, which would require the country to find alternative energy sources to keep its power system stable.

Coal produces roughly 10 percent of the energy consumed by Finland, which is the Nordics’ heaviest coal consumer and burned about 4.1 million tonnes of oil equivalent in 2016.

“This strategy has a goal of getting rid of coal as an energy source by 2030 ... We have to write a law ... and that will be next year,” Riku Huttunen, director general in Finland’s energy department, said.

The law will, however, leave “room for manoeuvre” to ensure security of supply, he said, meaning coal-fired power plants could still be available to avoid the risk of blackouts.

The stability of Finland’s power system will be under pressure as coal is more flexible than other forms of energy, a Thomson Reuters analyst said.

Finland is increasing its nuclear capacity, which could replace coal. But that may not be sufficient, a Nordic power trader said, as Finland will receive less nuclear power from neighbouring Sweden, which is phasing out two reactors.

“If you take away something used in the system, you have less supply and higher prices,” the trader said.

Helsinki is raising its nuclear power capacity to reduce dependency on Russian energy imports. Two new reactors, Olkiluoto 3 and Hanhikivi 1, are due to go online in 2018 and 2024, respectively.

The owner of Hanhikivi 1, Fennovoima, has said the project is on track, but Huttunen, the government official, said the schedule may be “enthusiastic” given that the company had yet to submit several documents regarding safety and economy.

Finland will also propose higher carbon taxes in 2018, he said, without giving further details. (Editing by Gwladys Fouche and Dale Hudson)